Twenty months in and the sprawling investigation into political corruption at Brazilian oil giant Petrobras has lost none of its ability to shake the South American country’s political and economic establishment.
The latest shockwaves to roil the country’s power base were caused by the arrests this week of a leading senator, a prominent rancher and the country’s top investment banker. The round-up will further paralyse the crisis-stricken government of President Dilma Rousseff.
Tuesday’s detention of José Carlos Bumlai brings the investigation a step closer to Luiz Inácio Lula da Silva. He is a close friend of the rancher accused of trading Petrobras contracts for financial assistance to Lula’s ruling Workers’ Party and allegedly members of the former president’s family.
But the week’s biggest shock came a day later with the arrest of billionaire banker André Esteves along with the Workers’ Party’s leader in the senate. Federal prosecutors accused both of attempting to obstruct their inquiry into corruption at Petrobras which has netted dozens of prominent business figures, lobbyists and politicians.
News of Esteves’s arrest sparked a sell-off of local stocks and the real currency. At one point, shares in his bank, BTG Pactual, were down 40 per cent. It was forced to deny reports that investors had rushed to pull cash from its investment funds but warned its chief executive’s arrest could result in a downgrade.
Financial clout
A consummate deal-maker central to several multibillion-euro transactions involving state-owned companies, Esteves was the public face of Brazil’s growing financial clout and publicly stated his ambition to turn BTG Pactual into a “tropical Goldman Sachs”. But Brazil’s supreme court authorised his arrest after the country’s chief prosecutor Rodrigo Janot questioned how Esteves obtained a copy of a secret plea bargain agreement between prosecutors and former Petrobras executive Nestor Cerveró.
BTG Pactual is part of a consortium that builds offshore platforms for Petrobras. Irregularities in the awarding of such contracts is at the centre of the corruption probe. Esteves denies any wrongdoing.
While Esteves’s arrest hit markets the detention of senator Delcídio do Amaral stunned the political class in Brasília, already reeling from evidence collected by investigators that it conspired with private companies to loot billions from Petrobras.
He was held by police after a recording emerged of a conversation in which the senator outlined how to influence the supreme court into releasing Cerveró, who had been picked up earlier as part of the Petrobras probe. The senator is also heard discussing how to help the former executive flee to Spain and be paid €12,500 a month to buy his silence. The recording identified Esteves as the source of the money.
Amaral became the first serving senator to be arrested since the country’s new constitution was drawn up in 1988. In another historic first, the senate later voted to uphold the arrest, stripping him of parliamentary immunity.
In a statement, Amaral’s Workers Party said the accusations against him had nothing to do with his party work and so it “did not judge itself obligated to offer any gesture of solidarity”. The party’s president, Rui Falcão, said it would now discuss expelling the senator.
One leading government ally described the party’s move as cowardly and it stoked fears in government that Amaral might now co-operate with prosecutors. In the plea-bargain document allegedly obtained by Esteves and passed to Amaral, Cerveró wrote that Rousseff “knew everything” about Petrobras’ controversial purchase of a refinery in Texas now part of the criminal investigation.
“Cerveró’s testimony accuses Dilma directly and says she visited him three times to pressure him to conclude the deal,” says David Fleischer, professor of politics at the University of Brasília. “That could be the smoking gun that would allow congress to install impeachment proceedings against her.”
Hole in finances
Amaral’s arrest will also hinder efforts by Rousseff to get her austerity programme through congress, despite a growing hole in the accounts.
“Because of the scandal the political class is not focused on the growing fiscal crisis so the likelihood of a new downgrade by early next year is increasing,” warns Prof Fleischer.
